Beijing’s factory activity shrinks for fourth month

BEIJING: Factory activity in China shrank in August for the fourth month in a row as the US ramped up trade pressure and domestic demand remained sluggish, pointing to a further slowdown in the world’s second-largest economy.

Persistent weakness in China’s vast manufacturing sector could fuel expectations that Beijing needs to roll out stimulus more quickly, and more aggressively, to weather the biggest downturn in decades.

The Purchasing Managers’ Index (PMI) fell to 49.5 in August, China’s National Bureau of Statistics said on Saturday, versus 49.7 in July, below the 50-point mark that separates growth from contraction on a monthly basis.

A Reuters poll showed analysts expected the August PMI to stay unchanged from the previous month.

The official factory gauge showed growing trade frictions with the US and cooling global demand continued to wreak havoc on China’s exporters.

Export orders fell for the 15th straight month in August, although at a slower pace, with the sub-index picking up to 47.2 from July’s 46.9.

Total new orders – from home and abroad – also continued to fall, indicating domestic demand remains soft, despite a flurry of growth-boosting measures over the past year.

“Frontloading of exports to the US ahead of higher tariffs supported trade and overall activity growth, but this effect will likely fade in the next few months,” said analysts at Goldman Sachs in a note.

Manufacturers in consumption-oriented industries such as the auto sector have been especially vulnerable. Carmakers such as Geely and Great Wall have slashed expectations for sales and profits.

The data showed activity at medium- and small-sized firms contracted, even as large manufacturers, many backed by the government, managed to expand in August.

Factories continued to shed jobs in August amid the uncertain business outlook. The employment sub-index dropped to 46.9, compared with 47.1 in July.

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